AXIS Capital (AXS) Q1 Earnings Surpass On Higher Premiums

AXIS Capital Holdings Limited (NYSE:AXS) reported first-quarter 2018 operating profit of $1.46 cents per share, surpassing the Zacks Consensus Estimate by 20.7%. The bottom line also skyrocketed 147.5% year over year.

Axis Capital Holdings Limited Price, Consensus and EPS Surprise

Premiums improved substantially in the reported period. The quarterly performance reflects the benefits of portfolio optimization initiatives and earnings potential. Underwriting profitability improved in both the company’s segments.

Operational Update

Operating revenues of about $1.3 billion missed the Zacks Consensus Estimate by 3.5%. However, the top line rose nearly 23% year over year.

Gross premiums written improved 39% year over year to about $2.7 billion, driven by 30% higher premiums written in the Reinsurance segment and 62% in the Insurance segment.

Net investment income increased 2% year over year to $101 million.

Total expense in the quarter under review increased nearly 20% year over year to $1.2 billion due to higher net loss and loss expenses, acquisition costs, general and administrative expenses, higher foreign exchange loss as well as higher interest expense and financing costs. The period also incurred Transaction and reorganization expenses, amortization of value of business acquired and amortization of intangibles, all of which were absent in the prior-year quarter.

AXIS Capital reported underwriting income of $143.7 million, increasing nearly ninefold year over year. Combined ratio deteriorated 1130 basis points (bps) to 90.8%.

AXIS Capital expects to deliver savings of $100 million by year-end 2020, leveraging Novae integration and transformation efforts.

Segment Results

Insurance: Gross premiums written increased 61.5% year over year to $880.8 million owing to better performing property, professional lines and marine lines associated with Novae buyout as well as accident and health, professional lines and liability lines, driven by new business and aviation lines associated with the Aviabel acquisition.

Net premiums earned increased 48% year over year.

Underwriting income was $69 million, increasing more than fivefold year over year. Combined ratio improved 890 bps to 88.1%.

Reinsurance: Gross premiums written in the first quarter jumped 30% year over year to $1.8 billion, largely on the back of premiums from catastrophe, marine and aviation lines associated with the Novae acquisition as well as increased premiums in motor, accident and health, credit and surety, catastrophe, liability and professional lines, partially offset by a decrease in marine lines.

Net premiums earned increased 7% year over year.

Underwriting income of $74 million soared from $5 million in the year-ago quarter. Combined ratio improved 1000 bps year over year to 88.4%.

Financial Update

AXIS Capital exited the quarter with cash and cash equivalents of $1.6 billion, up 20.6% over the level at 2017 end.

Notes payable and debt were $1.4 billion, almost flat with 2017-end level.

Net cash flows used in operations were $88 million. This includes payments associated with the RITC (Reinsurance to Close) transaction.

As of Mar 31, 2018, book value per share was $52.57, down 11% year over year.

Dividend Update

The company announced a dividend of 39 cents per share in the reported quarter.

Zacks Rank

AXIS Capital carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

The bottom line of Torchmark Corporation (NYSE:TMK) , The Progressive Corporation (NYSE:PGR) and RLI Corp. (NYSE:RLI) surpassed the respective Zacks Consensus Estimate in the first quarter of 2018.

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